Finance Minister Nirmala Sitharaman will present the Union Budget today (February 1, 2022). Ahead of the key upcoming elections in five states including Uttar Pradesh and Punjab, all eyes by the salaried class would be on the announcement regarding personal taxation.
Last year, Sitharaman had announced the scrapping of income tax for senior citizens under certain conditions, new rules for removal of double taxation for NRIs, and a reduction in the time period of tax assessments among other measures. She had also increased tax audit limit from Rs 5 crore to Rs 10 crore.
Here are the top five expectations on direct and indirect taxes.
Table of Contents
Direct taxes
1. Hiking the Section 80C limit: Income tax savings under Section 80C is presently available up to Rs 1.50 lakh in a financial year which may be revised upwards significantly.
2. Concessionary tax regime: Making the optional concessionary tax regime that came into effect from April last year, more acceptable, and raising the threshold Rs 15 lakh income for laying peak 30 per cent tax rate.
3. Taxing of crypto assets: Crypto assets which consist of a wide range of digital assets like non fungible tokens (NFT), wrapped asset token etc, are likely to get tremendous traction in the coming future. It is being anticipated that a specialised tax regime for cryptocurrency will be introduced in Budget 2022-23.
4. Long-term capital gains tax (LTCG): The long-term capital gains tax (LTCG) which was introduced through Finance Act 2018, has been a burden for investors and dented their confidence. Most big economies do not have LTCG tax. It is expected that LTCG on sale of domestically-listed equity shares can be exempted as it would boost investment through the stock market.
5. Taxes for corporates: Corporate firms expect that the amount or expenditure incurred for helping the society and employee welfare during Covid-19 can be allowed as deductible expenditure. Additionally, the government is expected to reduce the tax for those corporates that are engaged in research and development (R&D) activities to 15 per cent or less and allow weighted deduction on in-house R&D expenditure.
Indirect taxes
1. Customs duty on EV: A rationalisation of customs duty for EV and their ancillary components, renewable energy generation devices and related components is expected.
2. Concession for semiconductor makers: Sector specific concessions for semiconductor manufacturers with focus on exports is likely.
3. Allocations for PLI schemes: Budget allocations for expansion of production-linked incentive (PLI) scheme for sectors such as leather and laminates and additional schemes which can lure businesses into setting up additional manufacturing in those sectors which were earlier not in focus during previous budgets can help in reducing the pandemic impact.
4. Customs duty exemption: The government is currently reviewing 400 customs duty exemptions (as announced in previous budget). The final list is expected to be proposed as part of Budget 2022-23 and corporates are awaiting it so that there’s no adverse impact on trade.